Which of the Following Statements Is Most Correct

question 31

Multiple Choice

Which of the following statements is most correct?

• A) Increasing financial leverage is one way to increase a firm's basic earning power (BEP).
• B) Firms with lower fixed costs tend to have greater operating leverage.
• C) The debt ratio which maximises EPS generally exceeds the debt ratio which maximises share price.
• D) Both a and b are correct.
• E) Both a and c are correct.

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Definitions:

U.S. Dollars

The official currency of the United States, widely used as the global standard for financial transactions.

Managed Float

An exchange rate system where the price of the currency is largely determined by the supply and demand in the foreign exchange market but where central banks attempt to influence the rate by actively buying and selling currencies.

Financial Crisis

A situation where the value of assets drops rapidly and the financial system becomes destabilized, often leading to recession.

Supply of Money

The total amount of money available in an economy at a particular time, including cash, coins, bank notes, and money held in bank accounts.